Buying a long-term investment/rental property/potential future home - where? (Detroit: for sale, real estate)

[highlanderfil]

I've been mulling this idea in my head for a bit of time. Currently I rent a tiny 2-bedroom house within walking distance to Downtown Royal Oak for $850/month. I work for Ford, so I have a 30-45 minute one-way daily commute. Since I plan on sticking around, I'm starting to think that paying rent may not be my ideal way to go and so am trying to figure out what and where I would be able to afford to purchase. My primary goal is to buy a house which I can either a). call home or b). rent out in the event I'm out of the area for an extended period of time (such as a 1-2 year field assignment I've got coming up). I'm in my early 30s, not married, no children (I do have a serious girlfriend, so there's that to consider as well), make low 6 figures but also have MBA loans the principle of which currently amounts to approximately 1.2x my annual salary. So, my obvious considerations would be:

• Down payment requirements
• Monthly mortgage/HOA payments
• Property taxes
• Monthly utilities
• Typical rents in the area (in the event I have to rent the property out)
• Desirability of area (schools, hospitals, commute, etc)
• Reasonably high (above 60%) walk score

Ideally, if I'm the one living there, I wouldn't want to exceed my monthly living expenses by too much - there's wiggle room, but not a ton since I do want to pay off my student loans sooner rather than later. I do realize that many expenses may be tax-deductible, so that will factor in somewhat, as well. If I was picking a place for myself, I would probably not look outside Royal Oak/Ferndale/Birmingham, but those are easy answers which I might end up getting priced out of. Ann Arbor and Plymouth may be additional possibilities. Given the potential dual purpose of the property, though, I'd have to take into consideration what other people might want from it, how much they would be willing to pay to rent it, etc and balance that against what I want. For example, even if I knew that houses in (arbitrarily, so don't pick on my choice of example) Howell were cheap, but renting for twice the mortgage, I would still probably never buy there as I cannot envision myself living there.

With all that in mind, I'm hoping to find some truth in debate - let'er rip.

[skinnayyy]

Down payment requirements - In Michigan you don't need to have any downpayment as there are a lot of programs out there to stimulate buying houses. 10% would be good enough though if you wanted to put one down as usually if you do use one of the programs to not have a downpayment you have to have mortgage insurance which costs a little bit more a month.

Monthly mortgage/HOA payments - First half this all depends on the cost. Can't really give you any sort of information on that one. HOA payments you will likely not have one unless you want to move in to a gated community/subdivision type of place or bought an apartment. These are usually a couple hundred a month.

Property Taxes - Ferndale/Royal Oak are going to be a few thousand a year, and then Birmingham will be close to double what you'd pay in Ferndale/Royal Oak. The taxes will be rolled in to your mortgage payment though so you don't have to worry about writing a check for a few thousand dollars when it's due.

Monthly Utilities - Depending on how big your house you buy is, this can very greatly. I would estimate for Gas/Water/Electricity with normal usage for 1-2 people in a 1000 sqft house would probably be around 300-400 dollars a month. (this also depends on type of air conditioning and washer and dryer and all that that you use)

Typical Rents - This I'm not really so sure on but it will be Ferndale<Royal Oak<BHam in price.

Desirability of area - BHam will have the best schools. Royal Oak has Beaumont but BHam is also close by too. Ferndale and Royal Oak have nightlife and BHam has some. Your commute (I'm assuming Dearborn?) will largely depend on how close you can get to the freeway in either RO or Ferndale. Both of those have 696 running through/next to so you'd have easy access to then get on 75. BHam is a little bit out of the way having to take woodward to get to the freeway so you'd end up having a longer commute.

Walking - I don't think I've ever seen anyone ask for a walk score! But, If I were to live in one of these and want to walk around, it really depends on what type of walking you want to do. BHam has a lot more parks than both of the other options but RO has a larger downtown, and then Ferndale has the Woodward corridor. If you're going to want to walk to bars and restaruants I'd say Royal Oak > Ferndale > BHam. But if you want to take dogs for a long walk to a park and what not, I would reverse the order.

If you wanted to rent out your house for a year or two at a time I would imagine being near the hospital would be ideal because then you could rent it out to a doctor that could be doing their residency and needs temporary housing for that time period.

Personally, if I made the salary you did, I'd be in Bham. I just like the area more. Better for the future with the schools as well.

[DTWflyer]

For the type of house best suited for the rental market, Birmingham in my opinion is over-priced.

Royal Oak, Berkley, or Huntington Woods are more affordable and reasonably priced for both ownership and future rental.

The same exact houses, 1000-1800 sq. ft bungalows can be found in all of these cities.
Expect to may $75-100K more for the same type of house in Birmingham than in Royal Oak or Berkley.
Rent in Royal Oak seems to mostly be in the $1200-$1800 per month depending on specifics of the property. Birmingham, unless its a total dump, most rents are $1800-$2200 per month.

[MIEng]

My opinion, for a property in which you can live and that could be a potential income property, look for a nice area in Ferndale and buy there. B'ham, too expensive. Property taxes are too high and in case the house goes vacant your liabilities (taxes specially) will be high and could get you in trouble. You are single now with the potential of having a family in the future so buy in Ferndale now, enjoy having lower liabilities (cheaper mortgage,taxes) and save like crazy. When the time comes to start a family years from now, buy in B'ham and keep the Ferndale house as a rental property for additional income. With the income you have and if your future wife works too, you could have the Ferndale house paid off in a couple of years, lowering your liability and giving you nearly 100% income (of course minus taxes and maintenence). Royal Oak is ok but costs will be higher. We own rental property in Ferndale and it has is a solid rental market.

JMHO.

Good Luck.

[highlanderfil]

Thanks, guys. How about venturing outside of the Woodward Corridor triplet?

[DTWflyer]

The Woodward Corridor in my opinion is one of the better areas for a rental property simply because it appeals more to young(er) professionals, college grads, and hospital/healthcare workers at Beaumont and the midtown hospitals. The central location to most of the major employment areas - downtown Detroit, Southfield, Troy, even Auburn Hills.

Other areas, like Warren, Sterling Heights, etc. are going to be cheaper to purchase but may get a different type of tenant. Plus, the future values of the homes is somewhat less likely to increase.

Of course, you can always go out larger 2000+ sq ft homes in places like Farmington with the intent of renting it out to families some day.

[highlanderfil]

Originally Posted by DTWflyer

The Woodward Corridor in my opinion is one of the better areas for a rental property simply because it appeals more to young(er) professionals, college grads, and hospital/healthcare workers at Beaumont and the midtown hospitals. The central location to most of the major employment areas - downtown Detroit, Southfield, Troy, even Auburn Hills.

Other areas, like Warren, Sterling Heights, etc. are going to be cheaper to purchase but may get a different type of tenant. Plus, the future values of the homes is somewhat less likely to increase.

Of course, you can always go out larger 2000+ sq ft homes in places like Farmington with the intent of renting it out to families some day.

The places I am most curious about are Farmington, like you mentioned, Novi, Plymouth, Northville, Orchard Lake (and the surroundings) and Auburn Hills. I wouldn't really consider Warren or anything else along the 8 Mile corridor (call me a snob), although Sterling Heights and Troy are also interesting if for no other reason than the fact that I know very little about them. I wouldn't put Sterling Heights and Warren on the same playing field in terms of prospective tenants from having driven through each, but I concede that I don't know much about either town.

[usroute10]

Originally Posted by highlanderfil

The places I am most curious about are Farmington, like you mentioned, Novi, Plymouth, Northville, Orchard Lake (and the surroundings) and Auburn Hills. I wouldn't really consider Warren or anything else along the 8 Mile corridor (call me a snob), although Sterling Heights and Troy are also interesting if for no other reason than the fact that I know very little about them. I wouldn't put Sterling Heights and Warren on the same playing field in terms of prospective tenants from having driven through each, but I concede that I don't know much about either town.

Plymough (City of Plymouth and Plymouth Township) is a highly regarded community that is more of a family area than the Woodward Trio. The public school system (Plymouth-Canton) may be the best in Wayne County. The City of Plymouth is a small and older community that came about because it was close to a railroad stop. It has a cute but small downtown with an amazing park/public space right in the middle of the business district (something lacking in all of those suburban downtowns around here).



It is probably closer to Ann Arbor than Detroit, and a lot of people who live in Plymouth work and identify with Ann Arbor more than Detroit.

However, concerning walkability, outside of the downtown and the small historic neighborhoods that surround it, the City of Plymouth and Plymouth Township is just sprawl, sprawl, sprawl. Also, because of the housing stock, vibrant downtown area, and elite school district, it is rather expensive, but not as expensive as Birmingham.

-You will be in close proximity to all of the plethora of Big Box shopping in Canton and Plymouth does have some nice restaurants/shopping in the sprawly areas.
-You are close to Ann Arbor and all it has to offer.
-The commute to Dearborn should NOT be more than 25-30 minutes.
-Finding a renter should not be difficult especially if the house is near the downtown.


Novi has great schools and fantastic shopping. It is an exclusive community. You can't go wrong with all of the communities you mentioned. They are all well-to-do communities with fine public schools. Orchard Lake has all of those lakes.

P.S. I am a Detroit resident, so I have to put in a good word for Detroit. With the streetcar construction beginning later this year, the New Center neighborhood will be the terminus, and properties in the neighborhood will increase in value. Please consider this neighborhood. There is a house in that neighborhood for sale, although next to the freeway, looks like a decent bargain.

919 VIRGINIA PARK Street, Detroit MI 48202 - MLS# 214011779

You can get a picture of how much you can get for renting a house or townhouse in a certain city by going to Real Estate One or Keller Williams website. If you go to Real Estate One webpage, type in the City Name in the "City" window, and choose "$3,000" in the drop down menu for the "maximum price", and click on "Go". Doing these steps, I was able to see house rentals in Plymouth (City & Township) ranging from $1,100 to $2,200 depending on the size of the house.